Zhejiang Busen Garments Co.Ltd(002569) : special note on the company’s 2021 audit report with unqualified opinions with highlighted items

Zhejiang Busen Garments Co.Ltd(002569)

I. notes on matters highlighted in 2021 annual audit report with reservations

Asia Pacific (Group) Certified Public Accountants (special general partnership) issued an unqualified audit report with emphasis on the financial statements and operating results of the company in 2021. The highlights of the audit report are as follows: we remind the users of the financial statements to pay attention. As stated in note III (II) to the financial statements, as of December 31, 2021, BUSEN Co., Ltd. has accumulated a net loss of RMB 2701445 million, and the net cash flow from operating activities in recent three years is negative. These events or circumstances indicate that there are major uncertainties that may lead to major doubts about the sustainable operation ability of BUSEN Co., Ltd. This matter does not affect the audit opinion issued.

2、 Reasons and basis for issuing unqualified opinions with explanatory notes

According to Article 21 of the auditing standards for Chinese certified public accountants No. 1324 – going concern: “if the assumption of going concern is appropriate, but there is significant uncertainty, and the financial statements have fully disclosed the significant uncertainty, the certified public accountant shall express an unqualified opinion and add a separate part under the title of” significant uncertainty related to going concern “to the audit report, To: (I) remind users of financial statements to pay attention to the disclosure of matters mentioned in Article 18 of these standards in the notes to financial statements; (II) explain that these matters or circumstances indicate that there are major uncertainties that may lead to major doubts about the going concern ability of the auditee, and explain that the matter does not affect the audit opinion. “

The “significant uncertainty” mentioned in the above paragraph may have an adverse impact on the company’s ability to continue operations, which is related to the “significant uncertainty” in the notes to the financial statements.

3、 Description of the board of directors on the matters involved in the highlighted paragraph

The board of directors of the company believes that the highlighted item paragraph does not affect the reflection of the audit report on the financial status and operating results of the company during the reporting period. In order to improve the sustainable operation ability, the company is actively taking the following measures:

1. In terms of operation, the company further optimizes the sales mode of franchise and direct sales. On the one hand, it strengthens the expansion of direct sales mode, realizes vertical management and fine marketing, and improves the market popularity of BUSEN men’s wear brand; On the other hand, take various measures to encourage and support franchisees with good performance to realize the survival of the fittest; At the same time, actively expand new retail business and strive to improve the company’s sales performance;

2. In terms of management, the company will strengthen the control of various internal expenses and production costs and reduce the expenses of inefficient operating costs;

3. The company and the lawyer team will actively respond to the lawsuit, safeguard the legitimate rights and interests of the listed company as much as possible and reduce the possible losses of the company.

4、 Opinions of the board of supervisors

1. The audit report issued by Asia Pacific (Group) Certified Public Accountants (special general partnership) with unqualified opinions on highlighted items truly and objectively reflects the company’s financial status and operation in 2021. We have no objection to the audit report.

2. The board of directors of the company made a special statement on the audit report with unqualified opinions on the highlighted items. The statement on the matters involved is in line with the actual situation of the company, and we agree with the contents of the special statement.

3. The board of supervisors of the company will perform the right of supervision according to law, pay timely attention to the progress of emphasized matters, and urge the board of directors to perform the obligation of information disclosure in a timely manner.

5、 Opinions of independent directors

1. The audit report issued by Asia Pacific (Group) Certified Public Accountants (special general partnership) with unqualified opinions on highlighted items truly and objectively reflects the company’s financial status and operation in 2021. We have no objection to the audit report.

2. We agree with the company’s “special note of the board of directors on the audit report with unqualified opinions on highlighted matters”, and continue to pay attention to and supervise the company’s board of directors and management to take corresponding measures to solve the relevant matters involved in the qualified opinions as soon as possible, so as to better promote the development of the company and protect the interests of the majority of investors.

It is hereby announced.

Zhejiang Busen Garments Co.Ltd(002569) April 28, 2022

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